Economic Implications of Climate Change

Climate change is not a recent phenomenon and its effects stretch out to every aspect of human life. As we deeply dig into the disastrous effects of climate change we understand the economic implications of climate change. In addition to this, we will also analyze how overpopulation, deforestation, and wildfires have proved to be a major cause of it.

Economic Activity as a Cause

  Dating back to the industrial revolution, economic activity surged and new production techniques were implemented. The stress on the natural resources is evident from the fact that a multitude of species has become endangered, extensive deforestation for timber and construction has resulted in a loss of natural habitats, and dumping waste into waterways has harmed fisheries valuable resources.


What is deforestation? Before we comment on the drastic effects of deforestation, we need to know what does it means. Deforestation is the act of clearing and removal of trees naturally or deliberately for different reasons such as the collection of timber, construction, and also fro agricultural and grazing purposes.

Within the past decade, around 13 million hectares of forested land is destroyed. In the past 25 years, forests have shrunk by 502,000 square km (an area larger than the size of South Africa). The exponential growth in exploitation and deforestation has had a profound effect on climate change which in turn results in climate change. One of the major effects of deforestation is the increased emissions of greenhouse gases. Forests perform the function of absorbing carbon dioxide from the environment. However, deforestation dismisses this function, and carbon is released into the air.

Moreover, another major effect of deforestation is a disruption in the water cycle. Trees play a major role in controlling the water level however cutting down trees again dismisses this function of trees. In addition to this deforestation promotes a loss of habitats. This furthermore makes the species more vulnerable to extinction. Species maintain a balance in the ecosystem and their extinction may force the natural structure of our environment to collapse.  


Overpopulation has a great bearing on the environment and human activity. The world recently has a population of around 7.8 billion. The surging population puts immense pressure on natural resources. People tend to exploit more to fulfill their essential needs. For the sake of better opportunities to earn and bring up a large family, people often migrate to urban areas. This ultimately causes congestion in urban cities and the government must carry out deforestation activities for the provision of housing facilities.


Wildfire has occurred in many counterparts of the world including bush fires in Australia, Amazon forests wildfire, and the wildfire in Chernobyl to name a few. Wildfires have an unorthodox effect on the ecosystem and balance in the natural system of the environment. The wildfires usually destroy those areas and accentuate a loss in valuable nutrients and also different species. However, in some cases, the scenario is quite different. For example, the wildfires in Chernobyl resulted in not only caused a fire but also led to radioactive emissions into the air.

The Impact on Economic Activity

All the factors above have a strenuous effect on economic activity. Climate change and its many causes tend to halt economic activity in many ways. Below we will study the economic implications of climate change

42% of the Pakistani labor force is employed in agriculture and heavily depends on it for income generation. Droughts and floods caused by distorted weather patterns have halted food supply for the current population. Furthermore, droughts and floods have left farmers homeless and vulnerable to commit crimes to earn a living.

 Moreover, extensive exploitation of resources, wildfires, and deforestation all take a toll on tourism and the incomes earned from it. Chernobyl has been sealed for human activity, which was once an alluring tourist spot. Murree’s (Pakistan) waning charming due to poor maintenance has limited the number of tourists coming to that area. Moreover, residents were forced to leave their homes and live elsewhere. Congestion problems ride due to frequent migration of people from these areas to more urbanized places.

In addition to this, increased carbon emissions and wildfires have ignited a multitude of respiratory diseases, putting pressure on the health sector.  This results in an inefficient allocation of the budget, with officials focusing more on incentivizing workers and subsidizing industries. Fiscal budgets in turn are negative as tax collection is low relative to government spending.  Loans and borrowing become a norm hindering any sustainable acts in line.


To bring an environmental revolution, environmentalists alongside government officials must vouch for sustainable strategies to solve the crisis. We must understand that the solution must be a double standard framework; social awareness and implementation of laws must go hand in hand. Laws include giving away permits to firms to limit the waste they let into waterways and landfills, allow forestry to follow the notion of sustainable logging, and inculcate green technology into production processes.  These all do have a cost to industries and may require more resources by the government. However, once they are in effect they might limit the destruction save our future generations.

Also Read: Impacts of climate change on Ecosystem

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